All 529 savers avoid paying taxes on the investments' gains, and in more than 30 states, savers are eligible for additional benefits, such as state income tax credits or deductions. A few states allow their residents to apply the state-tax benefits to any 529 plan in the country. In these cases, Hadley recommends such users to enroll in gold-rated plans to maximize their benefits. But more often, residents forgo their home state's tax incentives if they choose a plan offered by another state. Hadley recommends those users to enroll in their highest-rated state-sponsored plans to qualify for those additional state tax benefits. For users who reside in states that do not offer additional state benefits, Hadley recommends those users enroll in gold-rated 529 Plans to maximize their benefits.
Based on your state residence, Hadley routes you to your top-rated plan that maximizes your benefits.
If so, how old is your child?
If so, when do you anticipate going to school? (years from now)
This question asks the user to identify the intended beneficiary of the 529 account. If saving for an existing child, knowing the age of the beneficiary is required for Hadley to recommend a plan that is most appropriate for the beneficiary’s age. This is relevant if the user prefers an age-based plan that becomes increasingly conservative over time as the beneficiary approaches 18 years old or as the target enrollment year approaches. If the user is saving for a future child, and if the user prefers an age-based 529 plan (see next question), then we recommend age-based plans that correspond to age 0 for the beneficiary. If the user is saving for their own education, and if the user has a defined target timeline for when the funds will be needed and prefers an age-based approach (see next question), then we recommend age-based plans that correspond to the age that equals the number of years until the target date subtracted from 18. For instance, if a user wants to save for her own education and wants to use the funds in 5 years from now and also wants to use an age-based approach (see next question), Hadley recommends age-based plans that correspond to age 13 (18-5).
This question asks the user to select their preference for age-based or static plans. This question guides the user to understand that as it gets closer to the time when the user needs the money to make their first qualified education expense (e.g., their first tuition payment), the investments in an age-based plan gradually shift into more conservative assets that reduce the risk in your portfolio, but also reduces the growth potential.
Users who responded “Agree” should enroll in age-based plans shift gradually over time in a “set it and forget it approach” such that the asset allocations become increasingly conservative as the target enrollment year or age approaches. The age-based portfolios have been especially designed and curated based on your education savings time horizon. For this reason, the majority of American 529 account holders are in age-based plans. For users who select A , Hadley recommends age-based plans that correspond to the age based on your responses from Question 2 (see above).
Users who responded “Disagree” do not want his/her/their investments to auto-shift into gradually more conservative portfolios, so Hadley recommends these users to enroll in Static Plans whose risk profiles remain fixed over time.
Hadley humanizes the process around saving for education because some users may lack the financial sophistication to understand this question. An option “I’m not sure” is made available. In these cases, Hadley recommends enrolling in age-based plans to the age based on your response from Question 2 (see above). If you’re not sure, Hadley recommends age-based portfolios because they have been professionally and strategically curated by the 529 Program’s program and investment managers based on your personal education savings timeline.
Some investors are comfortable with wide market swings, and others prefer less fluctuation with a generally lower return potential. For users who self-identify their risk acceptance, Hadley recommends plan options that align to their preferred risk acceptance level of conservative, moderate, or aggressive. It’s important to keep in mind there’s no right or wrong answers to this question: it’s based on what feels right and comfortable to you.
For users who are unsure, they are encouraged to select “I don’t know.” Hadley humanizes the process around saving for education because some users may lack the financial sophistication to understand this question. An option “I’m not sure” is made available. In these cases, Hadley guides the users through scenarios in questions 5-8 to understand the user’s personal savings style when it comes to their risk acceptance levels.
If a portfolio goes down 15%, it is obviously too risky for me. This would keep me awake at night.
Move some of the funds to less risky investments, but keep some of the funds in the original portfolio.
I have a long-term perspective for my education funding assets. I understand that my portfolio can decline in the short term, but I am willing to accept short term losses if that is what it takes to earn a potentially higher long-term rate of return.
This question assesses the user’s risk tolerance, acceptance, and preference. This question goes to the heart of what we mean by Risk Tolerance -- the ability to stay the course in the face of declining portfolio values. Users who select Choice A receive 1 point; users who select choice B receive 2 points; users who select Choice C receive 3 points.
I can think of a number of reasons why I might not maintain the plan for the full period contemplated.
I can envision certain situations where I would need to take money out of the plan early.
I have adequate insurance coverage and emergency funds set aside, so it is unlikely I would need to take funds out of my education savings 529 account prematurely.
This question assesses the user’s risk tolerance, acceptance, and preference. This question is designed to confirm your investment time frame, a key element in age-based portfolios, as well as static portfolios. Users who select Choice A receive 1 point; users who select choice B receive 2 points; users who select Choice C receive 3 points.
Investor suitability: This question assesses the user’s risk tolerance, acceptance, and preference. This question focuses on the pattern of your planned future contributions. Regular contributions create a form of income averaging, which reduces overall portfolio risk and thereby allows you to adopt a more aggressive initial allocation. Users who select Choice A receive 1 point; users who select choice B receive 2 points; users who select Choice C or D receive 3 points.
I’d like to accumulate as much as possible towards my goal, but if I don't make the goal I have in mind, other resources are available (I might be earning more in my career, other family members might volunteer to help, or my child may qualify for scholarships or other assistance).
If my goal is not achieved, I will likely have to do more borrowing than I am comfortable with. Incurring extensive loans may impact my ability to save for my own retirement after my child starts college. Neither would I like to burden my child with extensive loans to repay soon after graduation.
This question assesses the user’s risk tolerance, acceptance, and preference. To the extent that the user indicates that achieving education goals in mind isn't absolutely critical, the less aggressive the user needs to be with their initial asset allocation. Users who select Choice B run a risk for under-saving for their education goals, meaning that not saving enough may require more borrowing for tuition payment that the user might be comfortable with and will therefore run the risk of borrowing more funds as opposed to saving in a higher growth/higher risk plan, earlier on. Users who select Choice A receive 1 point; users who select Choice B receive 3 points.
Based on your total points, Hadley recommends plans that correspond to the following risk acceptance level based on your responses.
For users who want age-based plans, some 529 Programs’ age-based plans only have one standard blended risk option. In this case, Hadley recommends the age-based that corresponds to your timeline horizon.
For users who want static plans (see Question 3), Hadley recommends a static plan that corresponds to the user’s risk tolerance identified here.
Disclaimer: Most 529 Plans have menus broken out by conservative, moderate, and aggressive tracks, but some 529 Plans offer just one blended risk option. In the cases where we recommend a blended risk level plan, it’s because the plan is top-rated, has low fees, and maximizes your federal and any eligible state tax breaks.
This document is not meant to be nor should it be considered investment advice. Hadley utilizes the information in the “Find the Right Plan for Me” Questionnaire in order to deliver the most appropriate 529 Plan recommendations; accurate responses are critical to this mission.